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30
Apr-18
Monday

GNC store closures in 2018

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According to CNBC, GNC (vitamins/supplements chain) intends to close 200 stores in 2018.  GNC operates more than 8,000 locations globally, about 3,300 of which are corporately held. The business is not doing that well, but it remains profitable, with the first quarter of fiscal 2018 delivering net income of $6.2 million, or 7 cents per share, compared with $24.7 million, or 36 cents a share, a year ago. The company is negotiating an external investment and wants to improve its lease terms. In our assessment, the formula of GNC is a bit too clinical and rigid, making it difficult for international franchisees to adjust to local market requirements.
27
Apr-18
Friday

Coles uninspiring results

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Inside Retail reported that Coles’ top line revenue grew by 0.3% to $9.04 billion for the three months ending 31 March.  Coles’ managing director commented that both comparable sales and sales per square metre were on an improving trend.  Given its destruction of branded groceries and attempts to compete with ALDI on price, our view is that these results need to be viewed quite soberly - Coles will likely struggle to maintain any revenue growth in the long-term without serious structural changes. 

How smart retailers are redefining the c-store

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The Wall Street Journal reported that some US convenience store operators are redefining the retail niche by combining c-store staples with fresh food options. Stores such as Denver's Choice Market and Chicago's Foxtrot are catering to growing consumer demand for fast-casual quality in a grab-and-go setting.  Apparently, they generate 8% of sales from fresh produce.  This is possibly something Coles should look at, given that their convenience segment has declined by 8% during the last quarter.

Steinhoff problems escalate

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Reuters reported from Johannesburg that businessman Christo Wiese hit Steinhoff with a $5 billion lawsuit, sending shares of the South African multinational down 17%.  Wiese was chairman and the biggest shareholder until December last year. The claim related to the 2016 capital injection by Wiese to help Steinhoff pay its debt and fund the acquisition of the US company Mattress Firm.
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Apr-18
Thursday

Chinese to gain control over UK House of Fraser

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The London Telegraph reported that the Hong Kong-based parent of UK toy retailer Hamleys (C.banner International), has signed a memorandum of understanding to acquire a 51% share in House of Fraser. The deal is with China's Nanjing Xinjiekou Department Store, which owns an 89% interest in the UK department store.
25
Apr-18
Wednesday

Gap betting on Old Navy

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CNBC reported that the discounted apparel brand will add 60 more stores across North America this year, pushing its total to more than 1,000 Old Navy locations in the US by the summer. Gap, which also owns the flagship Gap banner, Banana Republic and Athleta, currently operates more than 3,500 stores globally.  Gap is meanwhile trimming back its fleet of Gap and Banana Republic stores, which haven't performed as well as Old Navy and Athleta of late. This demonstrates that a brick and mortar fleet can be profitable, but its offer and brand mix must be morphed in line with evolving markets.

Google: victim of its own success?

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The Wall Street Journal reported that net profit soared at Google's parent Alphabet, which also got an earnings boost from its stakes in companies such as Uber. Profit jumped 73% to $9.4 billion in the first quarter, up from $5.4 billion in the same period last year. This was partially driven by selling targeted advertising, which sooner or later will put Google under public scrutiny related to internet privacy. The new regulations currently in the making are unlikely to spare the biggest player in this business.
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Apr-18
Tuesday
23
Apr-18
Monday

UK House of Fraser in trouble

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The BBC reported that the department store chain has appointed KPMG as turnaround specialists, to advise it on a restructuring plan which could involve store closures and job losses.  KPMG will examine all options, including an insolvency process called a Company Voluntary Arrangement (CVA).  House of Fraser has 59 stores, 6,000 staff and 11,500 concession staff.  In January it asked landlords to cut rents, after poor Christmas trading. Under a CVA House of Fraser would again try to get agreement from landlords to reduce rents and maybe shut some of its 59 stores. 

North Korea's elite hackers

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The Wall Street Journal commented that North Korea’s “cyber army” is becoming one of the world’s most sophisticated and dangerous hacking machines. Over the past 18 months, the skill level of North Korean hackers has rapidly improved and their targets have become more worrisome. Pyongyang is cultivating elite hackers much like other countries train Olympic athletes. How good are they? Dangerously good - South Korean officials estimate their country is targeted 17 times every second.  We have pointed out many times that cyberspace will become increasingly dangerous and, therefore, the need for retailers to develop defense abilities.

Messing with perfection?

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According to the South African BusinessDay, Pick n Pay reported sales growth of 8% during the quarter, reaching an annual turnover of over AUD 8 billion.  Yet, the CEO announced a pretty serious shift in Pick n Pay's model, aiming to lift private label form 19% to 30% over the next 18-24 months.  In our view, this signals an entry into potentially dangerous territory. Once 30% of stock is sold under private label, supplier relationships tend to turn hostile.